The US inflation expectations for November 2025 stand at 4.50%, slightly below the 4.60% recorded in October but well above the 3.70% average seen in Q3 2025. This figure remains elevated compared to the 12-month average of 3.90% since November 2024, signaling persistent inflation concerns among consumers and investors. The data from the Sigmanomics database reflects ongoing price pressures despite recent monetary tightening efforts.

Drivers this month

• Shelter costs contributed 0.22 percentage points to inflation expectations.
• Energy prices stabilized, subtracting -0.05 percentage points.
• Food prices edged higher, adding 0.10 percentage points.

Policy pulse

The current 4.50% reading remains above the Federal Reserve’s 2% inflation target, indicating that inflation expectations are still not fully anchored. This suggests the Fed’s recent rate hikes have yet to fully convince markets of a sustained disinflation path.

Market lens

Immediate reaction: The US dollar index (DXY) strengthened by 0.30% in the hour following the release, reflecting a risk-off tilt amid persistent inflation concerns. Short-term Treasury yields (2-year) rose by 5 basis points, signaling increased expectations of further Fed tightening.

Inflation expectations are closely tied to core macroeconomic indicators such as CPI, PCE inflation, unemployment, and wage growth. The latest CPI data showed a 0.30% monthly increase in October 2025, with core CPI up 0.20%, consistent with the elevated inflation expectations. Meanwhile, the unemployment rate held steady at 3.80%, and average hourly earnings grew 4.10% year-over-year, supporting sustained consumer demand and wage-driven price pressures.

Monetary Policy & Financial Conditions

The Federal Reserve’s policy rate currently stands at 5.25%, reflecting aggressive tightening since early 2025. Financial conditions have tightened accordingly, with credit spreads widening and mortgage rates rising above 7%. Despite this, inflation expectations remain sticky, suggesting a lag in monetary policy transmission.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with the government running a deficit of 5.10% of GDP in FY2025. Recent infrastructure spending and social program expansions have supported aggregate demand, potentially contributing to upward inflation pressures.

Drivers this month

• Shelter inflation remains the largest contributor, reflecting tight housing markets.
• Energy price volatility has moderated, reducing upward pressure.
• Food inflation has ticked up due to adverse weather impacts on crops.

Policy pulse

The Fed’s target range remains challenged by these elevated expectations. The persistence above 4% indicates that market participants anticipate prolonged inflationary pressures, which may necessitate further policy tightening or extended high rates.

Market lens

Immediate reaction: US Treasury 2-year yields rose 5 basis points, while the USD strengthened 0.30%, reflecting heightened inflation risk premiums and expectations of tighter monetary policy.

Looking ahead, inflation expectations could evolve under several scenarios. A bullish scenario (20% probability) envisions inflation expectations falling below 3.50% by mid-2026, driven by successful Fed disinflation, easing supply chains, and stable commodity prices. The base case (60% probability) expects inflation expectations to hover between 4.00% and 4.50%, reflecting gradual progress but persistent wage and shelter pressures. A bearish scenario (20% probability) sees expectations rising above 5.00%, fueled by renewed geopolitical shocks, fiscal stimulus, or energy price spikes.

Structural & Long-Run Trends

Longer-term inflation expectations have shown resilience above 2.50%, influenced by demographic shifts, labor market tightness, and evolving supply chain dynamics. The persistence of shelter inflation and wage growth suggests structural factors may keep inflation elevated relative to pre-pandemic norms.

External Shocks & Geopolitical Risks

Ongoing geopolitical tensions, particularly in energy-producing regions, pose upside risks to inflation expectations. Supply chain disruptions from trade frictions or climate events remain key downside risks to growth but upside risks to inflation.

The November 2025 inflation expectations reading of 4.50% underscores the challenge facing US policymakers. Despite recent monetary tightening, inflation concerns remain elevated and sticky. The Fed may need to maintain restrictive policy longer than markets currently anticipate. Fiscal policy and external shocks will continue to influence the inflation trajectory. Market participants should prepare for volatility as inflation expectations adjust to evolving economic conditions.

Balancing upside risks from wage growth and geopolitical shocks against downside risks from tighter financial conditions and potential demand softening will be critical in the coming months.

Key Markets Likely to React to Inflation Expectations

Inflation expectations are a key driver for several asset classes. Markets sensitive to interest rates, currency strength, and inflation-linked assets will react notably to changes in these expectations. Below are five tradable symbols historically correlated with US inflation expectations:

• SPX – The S&P 500 index often reflects inflation-driven shifts in equity valuations and sector rotation.
• USDCAD – The US dollar vs. Canadian dollar currency pair is sensitive to commodity prices and inflation differentials.
• BTCUSD – Bitcoin’s role as an inflation hedge influences its price relative to inflation expectations.
• TLT – Long-term US Treasury ETF prices inversely correlate with inflation expectations and real yields.
• EURUSD – The euro-dollar pair reacts to relative inflation and monetary policy expectations between the US and Eurozone.

FAQ

What are US inflation expectations?

US inflation expectations represent the anticipated rate of inflation over a future period, influencing consumer behavior and monetary policy.

How do inflation expectations affect the economy?

They impact wage negotiations, spending, and investment decisions, shaping actual inflation and economic growth.

Why is monitoring inflation expectations important?

Because they guide central bank policy and market pricing, affecting financial stability and economic outlook.

Key takeaway: US inflation expectations remain elevated at 4.50%, signaling persistent inflation risks that may prolong Fed tightening and market volatility.